Under the Companies Act, 2013 there is no explicit prohibition that prevents an independent director from serving as an independent director on the boards of its holding, subsidiary, or associate companies. However, the appointment must be made only if the director continues to satisfy all the criteRead more
Under the Companies Act, 2013 there is no explicit prohibition that prevents an independent director from serving as an independent director on the boards of its holding, subsidiary, or associate companies. However, the appointment must be made only if the director continues to satisfy all the criteria for independence as laid down under Section 149(6).
Key Points
Statutory Provisions: Section 149(6) of the Companies Act, 2013 sets out the conditions that a director must meet to be considered independent. These conditions include requirements regarding integrity, expertise, and the absence of certain relationships with the company or its related entities (holding, subsidiary, or associate companies).
For instance, Section 149(6)(b) provides that an independent director “is or was not a promoter of the company or any of its holding, subsidiary or associate companies.” While these provisions ensure the director’s independence, they do not expressly bar a qualified independent director from being appointed on the board of a related company.
While the Companies Act, 2013 (particularly Section 149(6)) does not expressly prohibit an independent director from holding such dual roles, the director must continue to meet the independence criteria. Additionally, companies must consider the perception and regulatory implications to ensure that the director’s impartiality is not compromised.
Yes, independent directors are included in the total number of directors for the purposes of sub‐sections (6) and (7) of Section 152 of the Companies Act, 2013. Explanation Uniform Applicability:Section 152 of the Companies Act, 2013 sets out the procedural requirements for the appointment of directRead more
Yes, independent directors are included in the total number of directors for the purposes of sub‐sections (6) and (7) of Section 152 of the Companies Act, 2013.
Explanation
Uniform Applicability: Section 152 of the Companies Act, 2013 sets out the procedural requirements for the appointment of directors. Sub‐sections (6) and (7) require that every person proposed to be appointed as a director must provide his written consent (in the prescribed Form DIR‑2) and that such consent must be filed with the Registrar within 30 days of the appointment. These provisions apply to all directors without any distinction.
Inclusion of Independent Directors: The Act does not carve out any exception for independent directors in this context. This means that independent directors must also furnish their consent and complete the associated formalities, and their appointment is counted as part of the total number of directors on the board.
Relevant Provisions
While the Act does not explicitly single out independent directors in sub‐sections (6) and (7) of Section 152, the language used—“every person appointed as a director”—makes it clear that all directors, irrespective of their nature (executive, non-executive, or independent), must comply with these provisions.
When an independent director is being reappointed for a second term, the shareholders’ approval at the general meeting is required by passing an ordinary resolution. There is no need to pass a special resolution for this purpose. Section 149(10):This section permits the appointment of a director (inRead more
When an independent director is being reappointed for a second term, the shareholders’ approval at the general meeting is required by passing an ordinary resolution. There is no need to pass a special resolution for this purpose.
Section 149(10): This section permits the appointment of a director (including an independent director) for a term of up to five years.
Section 149(11): This section states that “no independent director shall hold office for more than two consecutive terms.” It does not specify that a special resolution is necessary for the reappointment; rather, the reappointment is subject to ratification in the general meeting by an ordinary resolution.
Yes, Under the Companies Act, 2013, the term of an independent director is subject to a two-term limit—even if each term is less than five years. Specifically: Section 149(10) of the Act allows an independent director to be appointed for a term of up to five consecutive years. Section 149(11) providRead more
Yes,
Under the Companies Act, 2013, the term of an independent director is subject to a two-term limit—even if each term is less than five years. Specifically:
Section 149(10) of the Act allows an independent director to be appointed for a term of up to five consecutive years.
Section 149(11) provides that “notwithstanding anything contained in sub-section (10), no independent director shall hold office for more than two consecutive terms,” which means that even if each term is shorter than five years, the maximum number of consecutive terms an independent director can serve is two.
For example, if an independent director is appointed for a term of three years and then reappointed for a second term of three years, they cannot be immediately reappointed for a third consecutive term without a break. They must wait for a period (typically three years) after ceasing to be an independent director before they can be reappointed.
This provision ensures a regular infusion of fresh perspectives on the board, maintaining the independence and effectiveness of corporate governance.
Yes, an alternate director can be appointed for an independent director, but with important conditions. Specifically, the person proposed as an alternate must satisfy all the qualification criteria required for independent directors. This is mandated by the Companies Act, 2013, which states that noRead more
Yes, an alternate director can be appointed for an independent director, but with important conditions. Specifically, the person proposed as an alternate must satisfy all the qualification criteria required for independent directors. This is mandated by the Companies Act, 2013, which states that no one can be appointed as an alternate director for an independent director unless he is qualified to be an independent director.
Additionally, it’s important to note that for listed companies, regulatory amendments effective from October 1, 2018, have restricted the practice—meaning listed entities are not permitted to appoint alternate directors for their independent directors.
Under Section 168 of the Companies Act, 2013, a director’s resignation becomes effective on the date the company receives the resignation notice, unless the notice specifies a later effective date. This means that once the director submits his resignation in writing to the company, his office is conRead more
Under Section 168 of the Companies Act, 2013, a director’s resignation becomes effective on the date the company receives the resignation notice, unless the notice specifies a later effective date. This means that once the director submits his resignation in writing to the company, his office is considered vacated from the receipt date (or the date stated in the notice) regardless of whether the company subsequently communicates the resignation to the Registrar of Companies.
For instance, if a director submits his resignation via email or physical notice on April 1, and no later date is mentioned, his resignation is effective from April 1. If a later effective date is mentioned in the notice, then his resignation will take effect on that specified date.
Yes, sitting fees are payable to a director who participates via video conferencing, provided that their participation is recorded as attendance at the meeting. The Companies Act, 2013 and the associated rules do not differentiate between physical and virtual presence for the purpose of awarding sitRead more
Yes, sitting fees are payable to a director who participates via video conferencing, provided that their participation is recorded as attendance at the meeting. The Companies Act, 2013 and the associated rules do not differentiate between physical and virtual presence for the purpose of awarding sitting fees. In essence:
Yes, an alternate director is required to obtain a Director Identification Number (DIN) under Section 153 of the Companies Act, 2013. The requirement for a DIN applies to every person who is appointed as a director, and this includes alternate directors. Their role, though temporary, is still that oRead more
Yes, an alternate director is required to obtain a Director Identification Number (DIN) under Section 153 of the Companies Act, 2013. The requirement for a DIN applies to every person who is appointed as a director, and this includes alternate directors. Their role, though temporary, is still that of a director under the Act, and therefore they must secure a DIN before they can effectively perform their duties on the board.
Under the Companies Act, 2013, the limit of directorships (i.e. holding office as a director in not more than 20 companies) applies to companies incorporated in India. This means: Section 8 Companies:Since Section 8 companies are incorporated under the Companies Act, 2013 (even though they are non-pRead more
Under the Companies Act, 2013, the limit of directorships (i.e. holding office as a director in not more than 20 companies) applies to companies incorporated in India. This means:
Section 8 Companies: Since Section 8 companies are incorporated under the Companies Act, 2013 (even though they are non-profit in nature), a directorship in a Section 8 company does count toward the limit of 20 companies.
Foreign Subsidiary Companies: A foreign subsidiary company is incorporated outside India and is governed by the laws of that jurisdiction. Therefore, a directorship in a foreign subsidiary is not covered by the Indian Companies Act and does not count toward the limit of 20 companies.
Based on legal commentary and judicial interpretations, the vacation of office of a director for not attending board meetings under Section 167(1)(b) of the Companies Act, 2013 has a prospective effect. This means: Effective Date:The director’s office is declared vacant from the date of the board reRead more
Based on legal commentary and judicial interpretations, the vacation of office of a director for not attending board meetings under Section 167(1)(b) of the Companies Act, 2013 has a prospective effect. This means:
Effective Date: The director’s office is declared vacant from the date of the board resolution or decision, and the effect is limited to future board meetings.
No Retroactive Impact: Actions taken by the director prior to the resolution remain valid. The non-attendance that triggered the resolution does not retrospectively invalidate decisions or the director’s prior acts.
Practical Implication: The director ceases to be a member of the board only from the moment the resolution takes effect. Past participation or decisions made before the resolution are not affected.
Can an Independent Director of a Company be appointed as Independent Director of its holding, subsidiary or associate company?
Under the Companies Act, 2013 there is no explicit prohibition that prevents an independent director from serving as an independent director on the boards of its holding, subsidiary, or associate companies. However, the appointment must be made only if the director continues to satisfy all the criteRead more
Under the Companies Act, 2013 there is no explicit prohibition that prevents an independent director from serving as an independent director on the boards of its holding, subsidiary, or associate companies. However, the appointment must be made only if the director continues to satisfy all the criteria for independence as laid down under Section 149(6).
Key Points
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See lessStatutory Provisions:
Section 149(6) of the Companies Act, 2013 sets out the conditions that a director must meet to be considered independent. These conditions include requirements regarding integrity, expertise, and the absence of certain relationships with the company or its related entities (holding, subsidiary, or associate companies).
While the Companies Act, 2013 (particularly Section 149(6)) does not expressly prohibit an independent director from holding such dual roles, the director must continue to meet the independence criteria. Additionally, companies must consider the perception and regulatory implications to ensure that the director’s impartiality is not compromised.
Whether independent directors shall be included in the total number of directors for the purpose of sub-section (6) and (7) of section 152 of the Companies Act, 2013 ?
Yes, independent directors are included in the total number of directors for the purposes of sub‐sections (6) and (7) of Section 152 of the Companies Act, 2013. Explanation Uniform Applicability:Section 152 of the Companies Act, 2013 sets out the procedural requirements for the appointment of directRead more
Yes, independent directors are included in the total number of directors for the purposes of sub‐sections (6) and (7) of Section 152 of the Companies Act, 2013.
Explanation
Uniform Applicability:
Section 152 of the Companies Act, 2013 sets out the procedural requirements for the appointment of directors. Sub‐sections (6) and (7) require that every person proposed to be appointed as a director must provide his written consent (in the prescribed Form DIR‑2) and that such consent must be filed with the Registrar within 30 days of the appointment. These provisions apply to all directors without any distinction.
Inclusion of Independent Directors:
The Act does not carve out any exception for independent directors in this context. This means that independent directors must also furnish their consent and complete the associated formalities, and their appointment is counted as part of the total number of directors on the board.
Relevant Provisions
While the Act does not explicitly single out independent directors in sub‐sections (6) and (7) of Section 152, the language used—“every person appointed as a director”—makes it clear that all directors, irrespective of their nature (executive, non-executive, or independent), must comply with these provisions.
See lessIn case of Re-appointment of independent director for second term, whether ordinary or special resolution is required to be passed?
When an independent director is being reappointed for a second term, the shareholders’ approval at the general meeting is required by passing an ordinary resolution. There is no need to pass a special resolution for this purpose. Section 149(10):This section permits the appointment of a director (inRead more
When an independent director is being reappointed for a second term, the shareholders’ approval at the general meeting is required by passing an ordinary resolution. There is no need to pass a special resolution for this purpose.
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-
See lessSection 149(10):
This section permits the appointment of a director (including an independent director) for a term of up to five years.
Section 149(11):
This section states that “no independent director shall hold office for more than two consecutive terms.” It does not specify that a special resolution is necessary for the reappointment; rather, the reappointment is subject to ratification in the general meeting by an ordinary resolution.
Whether an independent director may continue to be an ID for maximum two terms, even if each such term is less than 5 years.
Yes, Under the Companies Act, 2013, the term of an independent director is subject to a two-term limit—even if each term is less than five years. Specifically: Section 149(10) of the Act allows an independent director to be appointed for a term of up to five consecutive years. Section 149(11) providRead more
Yes,
Under the Companies Act, 2013, the term of an independent director is subject to a two-term limit—even if each term is less than five years. Specifically:
Section 149(10) of the Act allows an independent director to be appointed for a term of up to five consecutive years.
Section 149(11) provides that “notwithstanding anything contained in sub-section (10), no independent director shall hold office for more than two consecutive terms,” which means that even if each term is shorter than five years, the maximum number of consecutive terms an independent director can serve is two.
For example, if an independent director is appointed for a term of three years and then reappointed for a second term of three years, they cannot be immediately reappointed for a third consecutive term without a break. They must wait for a period (typically three years) after ceasing to be an independent director before they can be reappointed.
This provision ensures a regular infusion of fresh perspectives on the board, maintaining the independence and effectiveness of corporate governance.
See lessCan an alternate director be appointed for an independent director?
Yes, an alternate director can be appointed for an independent director, but with important conditions. Specifically, the person proposed as an alternate must satisfy all the qualification criteria required for independent directors. This is mandated by the Companies Act, 2013, which states that noRead more
Yes, an alternate director can be appointed for an independent director, but with important conditions. Specifically, the person proposed as an alternate must satisfy all the qualification criteria required for independent directors. This is mandated by the Companies Act, 2013, which states that no one can be appointed as an alternate director for an independent director unless he is qualified to be an independent director.
Additionally, it’s important to note that for listed companies, regulatory amendments effective from October 1, 2018, have restricted the practice—meaning listed entities are not permitted to appoint alternate directors for their independent directors.
See lessWhen does the resignation of a director become effective?
Under Section 168 of the Companies Act, 2013, a director’s resignation becomes effective on the date the company receives the resignation notice, unless the notice specifies a later effective date. This means that once the director submits his resignation in writing to the company, his office is conRead more
Under Section 168 of the Companies Act, 2013, a director’s resignation becomes effective on the date the company receives the resignation notice, unless the notice specifies a later effective date. This means that once the director submits his resignation in writing to the company, his office is considered vacated from the receipt date (or the date stated in the notice) regardless of whether the company subsequently communicates the resignation to the Registrar of Companies.
For instance, if a director submits his resignation via email or physical notice on April 1, and no later date is mentioned, his resignation is effective from April 1. If a later effective date is mentioned in the notice, then his resignation will take effect on that specified date.
See lessIs sitting fees payable to a director who participates through video conferencing ?
Yes, sitting fees are payable to a director who participates via video conferencing, provided that their participation is recorded as attendance at the meeting. The Companies Act, 2013 and the associated rules do not differentiate between physical and virtual presence for the purpose of awarding sitRead more
Yes, sitting fees are payable to a director who participates via video conferencing, provided that their participation is recorded as attendance at the meeting. The Companies Act, 2013 and the associated rules do not differentiate between physical and virtual presence for the purpose of awarding sitting fees. In essence:
See lessDoes an alternate director need to obtain a Director Identification Number under Section 153 of the Companies Act, 2013 ?
Yes, an alternate director is required to obtain a Director Identification Number (DIN) under Section 153 of the Companies Act, 2013. The requirement for a DIN applies to every person who is appointed as a director, and this includes alternate directors. Their role, though temporary, is still that oRead more
Yes, an alternate director is required to obtain a Director Identification Number (DIN) under Section 153 of the Companies Act, 2013. The requirement for a DIN applies to every person who is appointed as a director, and this includes alternate directors. Their role, though temporary, is still that of a director under the Act, and therefore they must secure a DIN before they can effectively perform their duties on the board.
See lessFor directorship,Whether section 8 companies and foreign subsidiary companies are covered in the limit of 20 companies?
Under the Companies Act, 2013, the limit of directorships (i.e. holding office as a director in not more than 20 companies) applies to companies incorporated in India. This means: Section 8 Companies:Since Section 8 companies are incorporated under the Companies Act, 2013 (even though they are non-pRead more
Under the Companies Act, 2013, the limit of directorships (i.e. holding office as a director in not more than 20 companies) applies to companies incorporated in India. This means:
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-
See lessSection 8 Companies:
Since Section 8 companies are incorporated under the Companies Act, 2013 (even though they are non-profit in nature), a directorship in a Section 8 company does count toward the limit of 20 companies.
Foreign Subsidiary Companies:
A foreign subsidiary company is incorporated outside India and is governed by the laws of that jurisdiction. Therefore, a directorship in a foreign subsidiary is not covered by the Indian Companies Act and does not count toward the limit of 20 companies.
Whether vacation of office of director on account of not attending board meetings under Section 167(1)(b) has prospective or retrospective effect?
Based on legal commentary and judicial interpretations, the vacation of office of a director for not attending board meetings under Section 167(1)(b) of the Companies Act, 2013 has a prospective effect. This means: Effective Date:The director’s office is declared vacant from the date of the board reRead more
Based on legal commentary and judicial interpretations, the vacation of office of a director for not attending board meetings under Section 167(1)(b) of the Companies Act, 2013 has a prospective effect. This means:
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-
-
See lessEffective Date:
The director’s office is declared vacant from the date of the board resolution or decision, and the effect is limited to future board meetings.
No Retroactive Impact:
Actions taken by the director prior to the resolution remain valid. The non-attendance that triggered the resolution does not retrospectively invalidate decisions or the director’s prior acts.
Practical Implication:
The director ceases to be a member of the board only from the moment the resolution takes effect. Past participation or decisions made before the resolution are not affected.